Credit

New York Fed Poll Shows Little Help for Credit-Strapped Businesses

Small businesses in New York, New Jersey, and Connecticut are still having trouble getting credit, according to the latest poll by the New York Fed, which was announced today. Only 63 percent of those companies that applied for loans or credit lines in 2012 were approved, the same as the year before, though more businesses reported getting the full amount they sought. More than one-third of profitable companies said they had difficulty getting the credit they sought.

Companies looking for amounts less than $100,000 had more trouble, succeeding only 57 percent of the time. Credit like this—relatively small amounts used for working capital—is in greater demand than larger amounts. “The majority of the firms are seeking $100,000 or under,” says Claire Kramer, a regional and community outreach officer of the New York Fed. “They continue to tell us that the reasons they’re seeking capital are for day-to-day operations.”

Only about one-third of companies in the survey sought credit in 2012. The companies most successful in getting financing were larger and more profitable and had borrowed before. The good news is the New York Fed recorded a lower rate of “discouraged borrowers,” or companies that didn’t seek loans because they feared they would be turned down.

“What we’re seeing is a little bit of of a self-selection in the application process,” Kramer says, with companies that have successfully borrowed in the past returning for more credit. The number of businesses that has sufficient earnings or savings and didn’t seek credit increased.

The New York Fed surveyed 812 businesses in New York, New Jersey, and Connecticut this spring about their borrowing behavior in 2012. The survey is representative of the region but doesn’t necessarily reflect what’s happening nationwide. Nearly 60 percent of the weighted sample had fewer than five employees.